Strategy Implementation

What is Strategy Implementation?

• The sum total of the activates and choices required for
the execution of a strategic plan – it is the process by
which strategies are put into action through budgets,
programs, and procedures.
• Implementation is the means to the ends (i.e., the
strategy), these take place primarily through
functional strategies and/or structure changes.
• Ask:
– Who?
– What?
– How?
– When?
 Top 10 Problems in Implementation
1. Slower implementation than originally planned.
2. Unanticipated major problems.
3. Ineffective coordination of activities.
4. Competing activities and crises that distract attention.
5. Insufficient capabilities of the involved employees.
6. Inadequate training and instruction of lower-level employees.
7. Uncontrollable external environmental factors.
8. Inadequate leadership and direction by departmental managers.
9. Poor definition of key implementation tasks and activities.
10. Inadequate monitoring of activities by the information system.
 Who Implements?
• Implementation involves a the whole management team
– Every unit and all employees have a role and need to be
committed

• CEO, other senior executives, and heads of major

organizational units must lead the process and orchestrate
major initiatives
– But they must rely on middle and lower-level managers to push
things on the front line and see that strategy is well-executed on
a daily basis.
 Functional Strategies
Functional Strategies: The collective pattern of day-to-day
decisions made and actions taken by employees responsible for
value activities. These include…
• Marketing Strategy • R&D Strategy
• Customer Targeting • Research focus/orientation
• Product/service positioning, mix, • Project priorities (budget, quality, time)
• Relationships to external organizations
breadth, and pricing
• Promotions practices • Information Systems
• Distribution channels • Hardware/software capability and
• Customer service policies integration
• Product/service policies • Linkages to external organizations
• Marketing research • Investments needed
• Operations Strategy • HR Strategy
• Capacity planning • Recruitment, Selection, Appraisals,
• Location and layout of facility Salaries, Wages, Training, etc.
• Equipment choices
• Financial Strategy
• Scheduling
• Capital, Investments, Returns
• Workforce policies
• Resource allocation
 Functional Strategies - Examples
• Linking Budgets to Strategy
– New strategies usually call for significant budget reallocations.
Depriving strategy-critical groups of the funds needed to execute
their pieces of the strategy can undermine the implementation
process!
• Establishing Strategy-Supportive Policies
– Provide top-down guidance regarding expected behaviors
– Note: Too much policy can be as bad as the wrong policy or no
policy at all
• Instituting Best Practices / Continuous Improvement
– Searching out and adopting best practices & benchmarking is
integral to effective implementation (see next slide)
• Installing Support Systems
– Mobilizing information and creating systems to use knowledge
effectively
• Motivational Practices and Incentive Compensation Systems
– Monetary and Non-monetary reward systems to motivate positive
actions
 Aspects Common to TQM and
Continuous Improvement Programs
• Committed leadership •Open organization
• Adoption & communication of TQM •Employee empowerment
• Closer customer relationships •Zero-defects mentality
• Closer supplier relationships •Flexible manufacturing
• Benchmarking •Process improvement
• Increased training •Measurement

Basic Characteristics of TQM/CQI Programs:

1. Valuable competitive asset in a company’s resource portfolio
2. Have hard-to-imitate aspects
3. Require substantial investment of management time and effort
4. Expensive in terms of training and meetings
5. Seldom produce short-term results
6. Long-term payoff - Instilling a TQM culture
 Employee Control and Rewards
• Control:
– Challenge is how to ensure actions of employees stay
within acceptable bounds
– Purpose of diagnostic control systems is to relieve
managers of burden of constant monitoring
– Control methods establish boundaries on what not to
do, allowing freedom to act with limits.
• Rewards (Two Types):
– Monetary Incentives – Non-Monetary Incentives
• Salary raises
• Praise
• Performance bonuses
• Constructive criticism
• Stock options
• Special recognition
• Retirement packages
• More, or less, job security
• Promotions
• Interesting assignments
• Perks
• More, or less, job responsibility
 Management by Objectives (MBOs)

•  MBO is the management concept and

framework coined and popularized by Peter
Drucker, the management consultant,
educator, and author who has been described
as ‘the founder of modern management’ for
his 1954 book The Practice of Management.
• MBO is the process of defining top company
goals and using them to define employees’
objectives.
• This helps all company contributors see their
accomplishments in connection to the
company’s top priorities as they carry out their
individual tasks, reinforcing alignment
between activity and outcome, which
dramatically increases productivity.
• It aims to increase organizational performance
by aligning goals and subordinate objectives
throughout the organization.
• Ideally, employees get strong input to identify
their objectives, time lines for completion, etc.
MBO includes ongoing tracking and feedback
in the process to reach objectives.
 Core Concept of MBO
• According to Drucker managers should "avoid
the activity trap", getting so involved in their
day to day activities that they forget their main
purpose or objective. Instead of just a few
top-managers, all managers should:
• participate in the strategic planning process, in
order to improve the implementability of the
plan, and
• implement a range of performance systems,
designed to help the organization stay on the
right track.
 Top Company MBO

• Become market leader

• Achieve higher cash flow
• Become a member of the fortune 500
• Increase customer retention rate to 92.5%
• Expand sales abroad by 10%
• Increase Gross Margin by 10%
• Increase assets to debt ratio by 15%
• Reduce carbon footprint by 5%
• Raise brand profile by 25%
• Promote or hire one new departmental executive
• Achieve payback period of 1.5 year for new products
 Marketing MBO Examples

• Generate 1,000 new Marketing Qualified Leads (MQL) per month

• Earn 40% of overall company revenue from marketing efforts
• Increase annual product subscribers by 35%
• Increase marketing ROI by 7.5%
• Triple social media following
• Double newsletter subscriptions
• Double unique web traffic
• Increase regular weekly website visitors by 45%
• Increase landing page conversion rates by 30%
• Increase surveyed brand awareness by 25%
• Get 10 media placements
• Hire 5 new account executives
• Collaborate with sales department to devise quality lead definition
 
 Main Principle of MBO
• The principle behind Management by Objectives
(MBO) is to make sure that everybody within the
organization has a clear understanding of the aims,
or objectives, of that organization, as well as
awareness of their own roles and responsibilities in
achieving those aims.
• The complete MBO system is to get managers and
empowered employees acting to implement and
achieve their plans, which automatically achieve
those of the organization.
 Where to Use MBO
• The MBO style is appropriate for
knowledge-based enterprises when your staff is
competent. It is appropriate in situations where
you wish to build employees' management and
self-leadership skills and tap their creativity,
tacit knowledge and initiative. Management by
Objectives (MBO) is also used by chief
executives of multinational corporations
(MNCs) for their country managers abroad.
• Management by Objectives (MBO) creates a
link between top management's
strategic thinking and the
strategy's implementation lower down.
• Responsibility for objectives is passed from
the organization to its individual members. It
is especially important for
knowledge-based organizations where all
members have to be able to control their own
work by feeding back from their results to
their objectives.
• Management by objectives is achieved
through self-control, the tool of effectiveness.
Today the worker is a self-manager, whose
decisions are of decisive importance for
results.
• In such an organization, management has to
ask each employee three questions:
• What should we hold you accountable for?
• What information do you need?
• What information do you owe the rest of us?
 MBO Strategy
• All individuals within an organization are
assigned a special set of objectives that they
try to reach during a normal operating period.
These objectives are mutually set and agreed
upon by individuals and their managers.
• Performance reviews are conducted
periodically to determine how close individuals
are to attaining their objectives.
• Rewards are given to individuals on the basis
of how close they come to reaching their goals.
 Six MBO Stages
• Define corporate objectives at board level
• Analyze management tasks and devise formal job
specifications, which allocate responsibilities and
decisions to individual managers
• Set performance standards
• Agree and set specific objectives
• Align individual targets with corporate objectives
• Establish a management information system to
monitor achievements against objectives
MBO Advantages & Disadvantages
• Advantages
• MBO programs continually emphasize what
should be done in an organization to achieve
organizational goals.
• MBO process secures employee commitment
to attaining organizational goals.
• Disadvantages
• The development of objectives can be time
consuming, leaving both managers and
employees less time in which to do their
actual work.
• The elaborate written goals, careful
communication of goals, and detailed
performance evaluation required in an MBO
program increase the volume of paperwork in
an organization.
 Aspects Common to TQM and
Continuous Improvement Programs
• Committed leadership •Open organization
• Adoption & communication of TQM •Employee empowerment
• Closer customer relationships •Zero-defects mentality
• Closer supplier relationships •Flexible manufacturing
• Benchmarking •Process improvement
• Increased training •Measurement

Basic Characteristics of TQM/CQI Programs:

1. Valuable competitive asset in a company’s resource portfolio
2. Have hard-to-imitate aspects
3. Require substantial investment of management time and effort
4. Expensive in terms of training and meetings
5. Seldom produce short-term results
6. Long-term payoff - Instilling a TQM culture
 Employee Control and Rewards
• Control:
– Challenge is how to ensure actions of employees stay
within acceptable bounds
– Purpose of diagnostic control systems is to relieve
managers of burden of constant monitoring
– Control methods establish boundaries on what not to
do, allowing freedom to act with limits.
• Rewards (Two Types):
– Monetary Incentives – Non-Monetary Incentives
• Salary raises
• Praise
• Performance bonuses
• Constructive criticism
• Stock options
• Special recognition
• Retirement packages
• More, or less, job security
• Promotions
• Interesting assignments
• Perks
• More, or less, job responsibility
Strategic Control
 Strategic Control Systems
• Strategic Control System: “a system to
support managers in assessing the relevance
of the organization’s strategy to its progress in
the accomplishment of its goals, and when
discrepancies exist to support areas needing
attention” Lorange, Morton & Ghoshal, 1986
Controls come in two primary types:
1. Feedback
2. Concurrent
 Feedback Controls
• Provides managers with information concerning
the outcomes of the organizational activities.
– Budgets: holding employees accountable for staying
within or well below an established budget
– Ratio Analysis: ROI, ROA, debt-to-equity, current
ratio, etc.
– Audits: Measures and controls firm conduct by
comparing to established guidelines such as GAAP
(general accepted accounting principles) or ethical
standards.
– Goals and Objectives
– Balanced Score Card Measures
 Concurrent Controls
• Provides managers with real-time information about
processes and activities, so that deviations can be
identified and corrected before they affect
organizational results.
– Statistical Process Control and Warning Systems: Setting
preferences for specific work activities (e.g., automobile
manufacturing line assembly) and allowing for warnings to
occur before it can impact outcomes.
– Inventory Controls: Tracks stock levels of different items so
new orders can be made (e.g., Amazon.com)
– Behavioral Controls: Encourage employees to comply to
norms and procedures (rules, regulations, and socialization
processes).
 Strategy Evaluation
• Examining the underlying bases of a firm’s
strategies
• Comparing forecasted results with actual
results
• Taking corrective actions to ensure that
performance conforms to plans.
• Adequate, accurate, and timely feedback is
the cornerstone.
 A Strategy-Evaluation Framework (Figure 9-2)
Activity One: Review Underlying Bases of Strategy
Evaluate internal situation Evaluate external situation
Compare revised versus existing Internal Compare revised versus existing External
Audit Information Audit Information

Do significant Yes
differences occur?
Activity
Three:
No

Activity Two: Measure Organizational Performance:

Compare planned versus actual progress toward meeting Take
stated objectives
Corrective
Actions
Do significant Yes
differences occur?

No

Continue present course

 Activity One:
Reviewing Bases of Strategy
• Re-examine external
– How have competitors reacted to our strategies?
– How could we more effectively cooperate with
competitors?
• Re-examine internal
– Have we added strengths and/or corrected
weaknesses?
• Very important to continually be monitoring
Measure Organizational Performance
Compare Past
Periods and to
By Product
Industry
Averages for By Division
the Company By Department
By Geographic Area
Compare to Pro By Salesperson
Forma Projections
By Strategic Business
Annual Objectives Unit
Long Term Obj.
Activity Two:
Measuring Organizational Performance
• Quantitative measures
– most commonly used are financial ratios
• Return on investment; return of equity; profit margin;
market share; debt to equity; earnings per share; sales
growth; asset growth.
• Intuitive judgments of performance
• Internal consistency of strategies
• Acceptable level of risk
 Activity Three:
Taking Corrective Actions
• Making changes to reposition a firm
competitively for the future.
 Take Corrective Action

Revise Mission
Alter Goals and Objectives
Establish New Goals and Objectives
Alter Strategies
Establish New Policies
Hire New Employees or Managers
Close or Open New Facilities
 Take Corrective Action (cont.)

Expand or Diversify
Institute Advertising Campaign
Purchase New Equipment
Allocate resources differently
Countless Other Actions May Be Needed
 Contingency Planning
• Alternative plans that can be put into effect if
certain key events do not occur as expected.
– Acquisitions: BT and MCI
• Alternative strategies not selected can serve
as contingency plans.
• Sometimes unexpected opportunities occur.